Bonnyrigg Turkish Islamic Cultural Association v Abdullah

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

4137/00 BONNYRIGG TURKISH ISLAMIC CULTURAL ASSOCIATION & ORS v SHAFIQ RK ABDULLAH & ORS JUDGMENT 1 HIS HONOUR: This is a notice of motion which was filed by the plaintiffs on 11 December 2001. The only aspects of that notice of motion that still remain to be dealt with are orders 4 and 5. 2 Essentially order 4 seeks that the third defendant pay sums of money totalling $148,000 among the six plaintiffs in proportions which are specified, and order 5 seeks an order that the third defendant pay the costs of the plaintiffs to date and all future costs, even though the proceedings have not yet been heard. 3 I will need to give some general background. I hope to do that relatively summarily. No doubt in giving a summary background I will make some oversimplifications and certainly what I am saying is not to be taken in any way as any finding of fact because I have not considered the facts, but I take it from what I understood from Mr Hallen SC's outline of submissions on the expedition application and by perusing, rather than reading, some of the solicitor's affidavits that have been filed in the proceedings. 4 It would seem that prior to 1992 various Islamic communities in New South Wales and Queensland had entered into an arrangement with the Government of Saudi Arabia to act as certifiers as to the proper slaughtering of meat so that it could be sold to Muslims in Saudi Arabia. That franchise or permission generated significant income for the six plaintiffs, who are all incorporated associations of members of the Islamic community in Sydney or Newcastle and whose principal activity appears to be to provide worship facilities for Muslims in their area. 5 In 1992 the first defendant was proactive in bringing about a joint enterprise to superintend the meat slaughtering certificate business, and the third defendant, who is usually referred to in documentation as SICHMA, was incorporated under the Associations Incorporation Act 1984. 6 Eleven of the Muslim societies which had been granted certification rights by Saudi Arabia surrendered those rights in favour of the new umbrella organisation. The original constitution of the organisation provided that there would be a committee and that the committee would (paragraph 11.4.v): " … distribute income among Member Societies after deducting all administrative costs so incurred. The Committee shall allocate 25% of the remaining funds for emergency/welfare needs of needy Islamic Societies for grants of loans to them as 'Kurze Husnah'. The remaining funds shall be equally divided among Authorised Member Societies." 7 The six plaintiffs were all within the term "Authorised Member Societies". 8 In 1995 the constitution was allegedly altered after a general meeting of the third defendant held on 15 October 1995. In particular, cl 11.4.v was deleted and replaced with a duty: "To distribute part of the fee realized through the certification service equitably among Societies after deducting all the costs on administering the Halal services and/or creating, establishing and maintaining facilities such as Schools/Trust/Properties for the present and future benefit of the Muslim community." 9 The plaintiffs' basic attack is that the first defendant and those in control on an executive level of the third defendant deliberately omitted to give notice of that meeting to the plaintiffs and others who might be thought to have opposed that amendment and, as a result, the amendment was not passed by a valid meeting and so was null and void. 10 The plaintiffs say that although they have had some distributions since 1995 there have been unequal distributions, and they are entitled to equitable compensation after taking proper accounts so that they receive an equal distribution from the net profit of the business. 11 The proceedings were commenced in late 2000 and first came into the list on 5 December 2000. They have been tentatively fixed for hearing before me on 22 April 2002, though the pleadings are still at the stage of the third further amended statement of claim, and I have had listed before me on 1 March questions concerning that document. That document has actually not made a claim for equitable compensation, but Mr Hallen SC, for the plaintiffs, has indicated he will add that prayer, and counsel for the defendants do not appear to be opposing that amendment. 12 With that background given, I have to consider two questions: (1) whether I should order some interim distribution of proceeds of the business; and (2) whether I should make some anticipatory order for costs. 13 (1) It is very difficult to see how I could make an order for interim distribution for a number of reasons. 14 The first practical reason is that the order sought seems very much like making a final order ahead of the determination of the proceedings. 15 Secondly, there is no material to suggest that any interim distribution would be recoverable. 16 Thirdly, the court would have to be clear, as it would in the case where an executor is making a distribution under s 94 of the Wills Probate and Administration Act 1898, that there were sufficient reserves to take account of trading debts and contingencies, as well as the proper expenses of the third defendant. 17 Fourthly, the claim made by the plaintiffs is not a claim in damages, so that s 76E of the Supreme Court Act 1970 does not apply. 18 Fifthly, the claim is not a claim for debt, nor is it a claim for distribution under a trust. It appears to be a claim for an account and then equitable compensation, so that the exact amount that should be paid is unclear. 19 Sixthly, the amount that is in the pool to be distributed, whether the first or second version of the constitution is the correct one, is not entirely certain. 20 Mr Whittle SC, who appears for the third defendant, says that this is, for all intents and purposes, a claim for summary judgment, and there is not even the usual affidavit that would support such an application. Accordingly, this application should be treated even more strictly. 21 I am not at all unmindful that many of the plaintiffs' problems have come about by the structure which the various Islamic communities have adopted in order to deal efficiently with the business which was created. If they had not involved themselves in corporations, but had set up some charitable trust, then the court would have had ready machinery to be able to deal with the problem. However, when corporate structures are interposed, each corporation is not, as it were, a mini-charitable trust, but is a straight legal entity within its own right. Within each corporation officers owe contractual and fiduciary duties to the corporation and sometimes to the members. The directors or committee members also owe fiduciary duties to the corporation and sometimes to the members. 22 The plaintiffs may well obtain, if the evidence is accepted at the trial, a declaration that the constitution amendment is invalid. They may well achieve some other declaratory relief, but there will be no light (in the sense of cash) at the end of the tunnel, unless after accounting it is found that there is some equitable compensation or, alternatively, that it is the obligation of the corporation to pay in equity moneys to the plaintiffs. Of course, after a four day hearing in this Court, if the third defendant has $200,000 in its bank account now, it is more likely to have less than $50,000 by the time its litigation is finished. Thus, the whole matter may be of no financial benefit for the plaintiffs anyhow, unless they can find some fiduciary duties against directors who have assets to satisfy compensation orders. 23 Most of the submissions made by Mr Whittle SC have force. It has not been demonstrated to me that this is a case where I should, even if I could, make an order for interim distribution and, indeed, I find, for the reasons I have already set out, very great difficulties in contemplating normal jurisdictional bases for making the orders. Accordingly, I decline to may any order under para 4 of the motion. 24 (2) So far as order 5 is concerned, the authorities in this Court and in New Zealand and England, so far as they go, seem to establish that s 76 of the Supreme Court Act 1970 does empower this Court to make orders for costs before hearing the proceedings. 25 However, the cases show that this is an exceptional jurisdiction and is only to be exercised in, to repeat the words, "an exceptional case". The most recent authority is the discussion of the New Zealand Court of Appeal in Berkett v Cave [2001] 1 NZLR 667. In that case the learned Judges of Appeal said at para [13] that: "To obtain such an order the applicant must, as a minimum, show: (1) The case mounted is clearly arguable. (2) There is a substantial public interest in obtaining a decision of the Court on the point or points at issue, irrespective of the result. (3) It would be unduly onerous for the plaintiff to be expected to fund the litigation even in the interim." 26 The judgment continues on in para [14] to make it clear that the application will fail unless the applicant can demonstrate at least these three points, but ultimately the outcome depends on the judge's appreciation of whether it is appropriate, after considering all relevant factors, for such an order to be made. 27 I do not think that we really should take that summary as gospel, and that it is useful to examine the types of case in which such an order has been made in reported cases in the last fifteen years or so. 28 There is a line of cases where a wife is involved in divorce proceedings and has no means to mount or defend the proceedings, and this has more recently extended to impecunious females in de facto relationships. 29 The origin of the rule is that it was part of a husband's duty to provide for his wife's costs in divorce proceedings. Indeed, the rule that existed up until about 1960, that the husband always paid the costs in every divorce case, came from the principle that this was the husband's duty. This duty stemmed from an age where women had no property of their own and all the wife's property belonged in law to the husband. As Moss J shows in In the Marriage of Chester (1995) 118 FLR 88, 93-95, there were a series of cases in the divorce court in which anticipatory orders for costs were made, so that wives could properly defend or mount divorce cases, though the orders were made to continue the conduct of litigation, not to reimburse for past costs. 30 Usually the orders were monitored so that all proper safeguards were given as to the payment of costs. In Parker v Parker (1992) 16 Fam LR 458, Bryson J applied that line of territory to a female claimant under the De Facto Relationships Act 1984, and that was upheld by the Court of Appeal; vide pp 462-3. 31 There is a second line of cases where a charity is seeking to protect a section of the community in public interest litigation against public authorities. An instance is R v Lord Chancellor; Ex Parte Child Poverty Action Group [1998] 2 All ER 755. 32 An extension of this class of case is where there is a class action by investors against a failed company or in connection with a failed company; see eg Ward v Guinness Mahon & Co Ltd [1996] 4 All ER 112. 33 It is clear that the jurisdiction extends beyond this because one can see that flavour coming through in remarks by Lord Denning in Wallesteiner v Moir (No 2) [1975] QB 373, 407 and Davies v Eli Lilly & Co [1987] 3 All ER 94. 34 Why I mentioned these cases is that I believe that they show that the words "substantial public interest" in the second of the propositions in Berkett v Cave must be read in the light of the illustrations that they give. 35 There is public interest in a lot of litigation, but it is only a small section of that litigation which has been covered by decided cases to date. Furthermore, in Australia there is probably a less benign view taken to costs in public interest litigation than there is overseas; see Oshlack v Richmond River Council (1998) 193 CLR 72 and the decisions in the Land and Environment Court where security for costs have been ordered against public interest plaintiffs. 36 Mr Whittle SC says that the present case is not one of general public interest within the meaning of the authorities, even though he concedes it is of considerable interest to a section of the community, namely the Islamic sector. 37 Mr Whittle SC also says that there is not the material from which I could conclude that it would be unduly onerous for the plaintiffs to be expected to fund the litigation in the interim. He points out that there is no evidence as to the means of these Associations; they appear to be six sets of Islamic communities; doubtless they contain a lot of very poor people, but it may well be they contain people of means as well; the reasonable costs of a four day hearing are assessed somewhere about $68,000-$80,000, and the material does not show that it would be unreasonable for this to be funded. 38 There have been substantial costs in the past, but as Moss J says in Chester's case, the authorities make it even harder, if not impossible, to achieve an order for costs under this principle in respect of past costs. Applications must be made early rather than retrospectively. 39 I consider that there is a lot of force in what Mr Whittle SC says and, having considered all of the circumstances, I am not convinced that I should make an anticipatory order for costs. 40 It follows then that the prayers asked for in orders 4 and 5 of the notice of motion are dismissed with costs. There should be one set of costs between the various defendants. 41 The matter is stood over for hearing on other issues to 1 March 2002. 42 There are parallel proceedings 4658/00. It is agreed that these can be subsumed in the present proceedings and so, without anyone intending there to be any estoppel, I will simply dismiss proceedings 4658/00. The parties' costs in those proceedings are to be their costs in 4137/00. ********************

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